By: Alice Ancona
U.S. and South Korea agree to begin the process to make amendments to Korea-U.S. Free Trade Agreement (KORUS). No details are yet available on the specific changes that will be made. U.S. and South Korea plan to use the agreement’s special “joint committee” process to make changes to the agreement rather than embark on a NAFTA like re-negotiation
The Administration and the President have indicated throughout the summer their desire to renegotiate or withdraw from KORUS – with the most serious statements coming at the beginning of September.
Over the summer, a rare bi-partisan letter from Congressional leaders overseeing the Senate Finance and House Ways and Means committees called for the White House to pursue further discussions instead of pulling out of a pact with an important economic and geopolitical partner, particularly at a time of heightened tensions in the Korean peninsula. The U.S. Chamber of Commerce issued a statement opposing pulling out of KORUS.
KORUS is five years old – nowhere near as mature as the North American Free Trade Agreement (NAFTA). The U.S. currently maintains a trade deficit in good exports with South Korea. Its important to note that trade is more than exports. The U.S. also maintains a services exports surplus with South Korea. While origin-exports are important drivers of economic growth — according to the Department of Labor—it is important to note that 80% of the U.S. work-force works in the service sector.
KORUS also includes an investment chapter that is designed to facilitate bilateral investment between the U.S. and South Korea. By any measure, the United States is the net beneficiary here. Korea is the 14th largest foreign direct investor in the United States with significant new investments in the horizon. The Hyundai Motor Group, which includes Hyundai Motor and Kia Motors has stated that it plans to increase investment into the U.S. by 50% to $3.1 billion over five years and may build a new plant there. LG Electronics also is looking to increase investment by building a manufacturing facility in the U.S.
While there are opportunities to grow trade and tap into the South Korean market, KORUS agreement still has some matter to address such as issues relating to regulatory transparency, customs clearance, and regulatory overreach. Florida trade with South Korea has increased 86 percent since 2011.